Bill to cut desal project costs heads to Governor

SACRAMENTO &GT;&GT; State legislation aimed at saving Monterey Peninsula water ratepayers millions in desalination project financing costs is headed to the Governor's desk.

Senate Bill 936, backed by State Sen. Bill Monning (D-Carmel) and other Central Coast lawmakers, was approved by the State Senate on Wednesday. State Sen. Anthony Cannella (R-Ceres), and State Assemblymen Mark Stone (D-Scotts Valley) and Luis Alejo (D-Watsonville) also backed the bill.

The legislation would allow the Monterey Peninsula Water Management District to issue water rate relief bonds to provide lower-cost public funding for more than a quarter of the California American Water-backed desal project, which is expected to cost between $270 million and $320 million depending on the size of the plant.

The public financing could save ratepayers up to $66 million over the life of the project debt, according to Monning's office, though local officials have estimated the total savings at between $78 million and $99 million.

In a statement, Monning said "by enabling this alternative financing mechanism to be issued, water rates that are lower than traditional utility financing mechanisms could be realized by water customers."

Carmel mayor Jason Burnett, who played a key role with Peninsula water district general manager Dave Stoldt on the issue, hailed what he called a big step toward cutting the cost of the desal project.

"We're pleased and looking forward to the Governor's signature," Carmel mayor Jason Burnett said. "There's no question it's the largest source of savings we're pursuing for the project."

Burnett pointed out that Cal Am agreed to cut its potential profit on the desal project by about half as a result of the public financing plan.

This is the first time a water utility project has used the financing scheme known as "securitization," which has previously been used by electric utilities.

Cal Am's desal project is designed to provide a replacement source of water to offset a state-ordered cutback in pumping from the Carmel River that is scheduled to take full effect by the start of 2017.